2009 was the start of the global period of an economic contraction where we see multi national corporations take on a slump, abatement, bust, decline, depression, diminution, lull, pause, retreat, withdrawal, bankruptcy, collapse in their financial standings!

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Nov 5, 2009

Microsoft Corp said on Wednesday it is cutting a further 800 jobs across its operations, on top of 5,000 jobs already eliminated under a plan to reduce costs that was announced in January.
A spokesman for the world's largest software firm said the latest job cuts are spread across the company's global operations, but about 200 are in and around its headquarters in Redmond, Washington.Microsoft originally had planned to cut 5,000 jobs, or about 5 percent out of 96,000, before June 2010. The Microsoft spokesman said that plan has been expanded with the new layoffs and is now complete, well ahead of schedule.As of October 23, Microsoft had 91,005 employees worldwide, according to its website.

Oct 31, 2009

US authorities seized nine failed banks yesterday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation’s banking industry are being crippled by bad loans.
The move brought the total number of failed banks in 2009 to 115 — their highest annual level since 1992 — with analysts expecting more to come. Among the lenders seized yesterday was Los Angeles-based California National Bank, in what was the fourth-largest US bank failure this year.

The largest institution to fail in the current financial crisis was Washington Mutual, which boasted US$307 billion (1,044 billion) in assets when it was shuttered in September 2008.

US Bancorp yesterday acquired the nine banks that had been held by FBOP Corp, picking up US$18.4 billion in assets and US$15.4 billion of deposits.

Visibly worried employees lined up to file into Cal National’s head offices in the heart of a deserted downtown Los Angeles on a chilly Friday evening, where they had their employers’ fate explained to them, regulators said.

“We’re getting ready to turn everything over to US Bank,” said Roberta Valdez, a spokeswoman for the Federal Deposit Insurance Corp, which helped supervise the transfer of FBOP’s assets. “They will continue to operate as normal in the interim,” she added, referring to lenders acquired from FBOP.

US Bancorp — which has been buying up distressed assets this year — is picking up the lenders once owned by FBOP, a private Illinois group with over US$18 billion in assets that owned banks in Texas, Illinois, Arizona and California.

Cal National is FBOP’s largest bank by branches. Others that will now go under the US Bancorp umbrella included BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, and the Community Bank of Lemont.
“This transaction is consistent with the growth strategy that we have outlined many times in the past, which includes enhancing our existing franchise through low-risk, in-market acquisitions,” said Rick Hartnack, vice chairman of consumer banking for US Bancorp.

“This transaction adds scale to our current California, Illinois and Arizona footprints.”
In the “near future”, all nine lenders’ branches will be re-branded US Bank, which is the California-focused unit of US Bancorp’s that operates a network of more than 770 branches across Illinois, Arizona and California.

US Bancorp did not specify what would happen to the new employees it inherits.
Cal National operates 68 branches across Southern California with more than US$7 billion in assets. As of June 30, the lender maintained five times as much foreclosed property on its books and twice as many non-current loans as it had a year earlier, according to the Los Angeles Times, which first reported news of its evening takeover yesterday.

Cal National lost about US$500 million on heavy investments in Fannie Mae and Freddie Mac preferred shares, the newspaper added, referring to securities rendered nearly worthless by the government takeover of the mortgage firms last year.

According to FDIC data, Cal National was the fourth biggest bank failure this year in terms of assets, just edging out Corus Bank, seized Sept 11 with a flat US$7 billion of assets.
A bank official who answered the main number at Cal National’s headquarters said they could not talk at the time.

Banks are still cleaning up their balance sheets from the recent credit boom that fuelled banks’ appetite to extend loans, many with poor underwriting and triggers that caused borrowers’ payments to spike to unaffordable levels.

More lenders are expected to go under this year as the industry tries to get a handle on commercial real estate loans that will continue to worsen, as more strip malls go vacant and residential developments stall.
Banks held about US$1.7 trillion in commercial real estate loans at the end of September, according to Federal Reserve data, or about 15 per cent of their total assets. But to the extent these loans weaken, small banks are likely to be hit the hardest because larger banks were better diversified.

Before FBOP, US Bancorp bought Downey Savings of Newport Beach and PFF Bank & Trust of Pomona when those thrifts failed last November, the newspaper said. Just this month, US Bancorp bought 20 Nevada branches from BB&T Corp, which had acquired them as part of its deal to buy Colonial BancGroup Inc, it added

Oct 29, 2009

Signalling that worse times are ahead for magazines, Time Inc. is expected to announce next week that it will cut US$100 million (RM340 million) from costs, including another big round of layoffs.

Time Inc., the publisher of magazines like Time, Fortune, and People, has already cut costs drastically: a year ago, it announced it was dismissing 6 per cent of its work force, or about 600 people. The timing is coordinated with the third-quarter earnings announcement from its parent company, Time Warner, sources said. That is scheduled for Wednesday morning.

But that was apparently not enough to make up for revenue declines. The US$100 million in costs is expected to come largely from layoffs, said sources, who asked to remain anonymous as they were not authorised to discuss the matter.

Michael Nathanson, an analyst at Sanford C. Bernstein & Company, said that he expected third-quarter revenue at Time Inc. would fall about 19 per cent, to US$900 million.

“For the year, we’re at about US$3.7 billion, and this company had done almost US$5 billion as late as 2007,” Nathanson said.

Since 2004, Time Inc. has cut about US$800 million in costs, Nathanson said.

Over all, Nathanson said, he expects Time Warner to post earnings of 54 cents a share, well up from the 30 cents a share it posted in the third quarter of 2008.

Time Inc. has been cutting costs over the last several years. Since 2007, it has shut down magazines including Business 2.0, Cottage Living, Southern Accents and Life, which it had revived as a newspaper supplement. Last week, Fortune announced that it would no longer be published every other week, and would drop its frequency to 18 issues a year, from 25. A stricter expense-account policy has been in place for some time, and some magazines have decreased the weight of the paper they use.

A number of Time Inc. employees are covered by a union contract, which mandates severance in case of layoffs. Employees of Time, Sports Illustrated, People, Money, Fortune and Fortune Small Business are covered by agreements with the Newspaper Guild of America, said Bob Townsend, local representative for the guild.

Covered employees at those magazines are eligible for severance packages in a layoff, of two weeks’ pay for every year of employment, with a cap of 52 weeks’ pay. Longtime employees get a bonus, with 20-year veterans getting an additional eight weeks’ pay, and 25-year employees an additional 10.
Townsend said that the Guild was usually notified in advance of layoffs, but it had not heard anything yet. “We have not been told there are going to be any layoffs next week,” Townsend said.
Dawn Bridges, a Time Inc. spokeswoman, declined to comment.

The layoffs and cost-cutting follow moves at competitors. Forbes is in the midst of dismissing about 40 to 60 of its editorial staff, and most Condé Nast magazines are reducing their budgets by about 25 per cent, which has included handfuls of layoffs at many of its magazines.

Oct 13, 2009

China’s super-rich have bounced back from the financial crisis with a vengeance, and the country now has more known dollar billionaires than any other country except the United States, according to a new report.

The annual Hurun Report released yesterday said China has 130 known US dollar billionaires, up from 101 last year.

The number in the US is 359 while Russia has 32 and India 24, according to Forbes magazine.

A Warren Buffett-backed car entrepreneur worth US$5.1 billion (RM17.2 billion) has surpassed a disgraced appliance tycoon to become the richest person in China.

Huang Guangyu, the richest man in China last year, dropped to 17th on the list this year with a worth of US$3.4 billion, after he resigned as chairman of the country’s biggest appliance chain while under investigation for alleged economic crimes.

Car mogul Wang Chuanfu, as chairman of BYD Co, made big strides in the past year to become the first carmaker to launch the mass production of a plug-in hybrid electric vehicle.

The company also secured backing from US billionaire investor Buffett, whose MidAmerican Energy Holdings has a 9.9 per cent stake in the Hong Kong-traded company.

With help from a growing domestic car industry, Wang’s 27.8. per cent stake in BYD elevated him 102 places in Hurun Rich List’s 2009 rankings.

Second place went to Zhang Yin and family, owner of paper recycler Nine Dragons Paper, while in third place was Xu Rongmao and family, owner of Shimao Property Holdings.

China’s rich are also getting richer, with the average wealth on the list standing at US$571 million, up almost one-third from last year, said compiler Rupert Hoogewerf.

“With the greatest wealth destruction in the West of the last 70 years, we’ve seen China buck the trend and the wealth seems to be still growing,” Hoogewerf told Reuters on the sidelines of an event to unveil the 2009 rich list.

“They’ve put the credit crunch behind them,” he said. “The key driver has been urbanisation. You’ve got all these cities being built, and that requires property developers, iron and steel manufacturers. The latest thing is cars.”

Hoogewerf also said the actual number of billionaires could be higher than estimated.

“Either they are super-discreet, or perhaps they haven’t come to the surface,” he said. “Having said that, the transparency of wealth... is now very much in the open. There’re many more listed companies.”

He said that among the people who probably should have been listed are Liu Chuanzhi, chairman of the world’s No. 4 PC maker Lenovo, and Chen Feng, founder of Hainan Airlines.

They are not on the list because it is not known how rich they really are.

The worst US recession since the Great Depression has ended, but weak household spending as the labour market struggles to create jobs will slow the pace of the economy’s recovery, according to a survey released yesterday.

The survey of 44 professional forecasters released by the National Association for Business Economics, also known as the NABE, found that 80 per cent of the respondents believed the economy was growing again after four straight quarters of declines.

“The great recession is over,” NABE President-Elect Lynn Reaser said.

“The vast majority of business economists believe that the recession has ended, but that the economic recovery is likely to be more moderate than those typically experienced following steep declines.”

Recessions in the United States are dated by the National Bureau of Economic Research. The private-sector group, which does not define a recession as two consecutive quarters of decline in real gross domestic product, often takes months to make determinations.

The recession that started in December 2007 is the longest and deepest since the 1930s. It was triggered by the US housing market’s collapse and the ensuing global credit crisis.

While the economy is believed to have rebounded in the third quarter, analysts believe that ordinary Americans will probably not see much difference as unemployment will remain high well into 2010, restraining consumption.

“We don’t necessarily expect the US economy to fall into a double-dip recession. This time round, consumers will be reluctant to join the party,” said Paul Ashworth, senior US economist at Capital Economics in Toronto.

The NABE survey, conducted in September, predicted real GDP growth expanding at an annual pace of 2.9 per cent over the second half of this year. Output for all of 2009 is expected to contract 2.5 per cent and next year, rebound 2.6 per cent.

Much of the anticipated recovery was seen driven by businesses rebuilding their inventories after aggressively reducing unwanted stockpiles of unsold goods to match weak demand.

HOUSING PRICES TO HIT BOTTOM

Investment in the residential market would also add to growth, with the majority of the survey’s respondents convinced that the housing market downturn, which has lasted more than three years, was close to coming to an end.

About two-thirds of respondents believed house prices will reach a bottom this year. The survey found that high house prices would not pose a threat to the sector’s recovery.

The survey predicted that the unemployment rate will rise to 10 per cent in the first quarter of 2010 and edge down to 9.5 per cent by the end of that year. The labour market was not expected to regain most of the jobs destroyed in the recession until 2012 or beyond.

The weak labour market will continue to weigh on consumer spending, slowing the recovery. The jobless rate climbed to 9.8 per cent in September — a 26-year high — from August’s 9.7 per cent.

Labour market slack, combined with weak wage growth, meant inflation would not be an obstacle to the economic recovery and the Federal Reserve will not be under pressure to raise interest rates, the survey found.

“With improving credit markets, the US economy can return to solid growth next year without worry about rising inflation,” Reaser said.

The US central bank was seen leaving its overnight benchmark lending rate near zero until late next spring, followed by measured increases that would take the rate to 1 per cent by the end of 2010, the survey showed.

Despite signs of improvement in the financial markets, most respondents believed that it would take some time for them to return to normal. Only 29 per cent believed this would happen in the second half of next year.

Respondents also expected the US dollar to weaken further this year and into 2010, but did not see this contributing to a narrowing of the country’s trade deficit as the economic revival stimulates demand for imports.

The dollar has lost about 5.8 per cent of its value against a basket of currencies so far this year, largely because of worries over the government’s growing budget deficit and expectations that the Fed will keep interest rates at super-low levels for a while.

Sep 30, 2009

The chairman of Wal-Mart Stores Inc. warned Wednesday the global economic recovery will likely be lethargic, even as the retailing behemoth sees great growth potential in China and India.

"The world recovery is going to be led by Asia although it's going to be very challenging. I think this recovery is going to be a slow one," Robson Walton told a global CEO business conference here.

Walton said "sales have been tough" for Wal-Mart, the world's biggest retailer, even though it was benefiting from the economic downturn as more people shop at discounters for bargains including over-the-counter drugs and eat-at-home food.

He warned that high unemployment and slower lending will drag on U.S. economic growth, likely resulting in the weakest recovery in decades.

Chairman of Wal-Mart Stores Inc Robson Walton

Walton said international operations accounted for one-third of Wal-Mart's global sales, and the proportion was expected to increase as the group focuses on larger markets in Asia.

"China is a big opportunity for us. We are just getting started in India, where there's great opportunity for us," he said.

"There is change and opportunity in the crisis. If we want to be successful, we got to change. We are working very hard to get our cost down and developing high-efficiency smaller stores to go into urban areas," he said.

He didn't elaborate and couldn't be reached for further comments.

Wal-Mart has more than 250 stores in China but only ventured into India in May to tap the country's $430 billion retail market.

Bharti Wal-Mart Private Ltd., a joint venture between India's Bharti Enterprises and Wal-Mart, opened its first wholesale outlet called "Best Price Modern Wholesale" in Amritsar in India's northern state of Punjab

The company has plans to invest $100 million over the next three years to open 10 to 15 more wholesale outlets, which would employ 5,000 people across India.

But for now, it can only sell its 6,000 food and nonfood items to other businesses because Indian law prohibits foreign companies from selling direct to customers in multi-brand retail outlets to protect smaller domestic retailers.

Wal-Mart has benefited from shoppers focusing on necessities during the recession and it has drawn more affluent shoppers away from rivals with its new focus on better brands, better service and cleaner stores.

The chain has tightened its inventory controls and improved its earnings in the second quarter.

However, the key barometer of same-stores sales in the U.S. - or sales at stores open at least a year - slipped 1.2 percent during the period - a worrisome confirmation of broad weakness in consumer spending.

It has said the U.S. economy will remain challenging in coming months and force shoppers to keep seeking low prices and small packages.

Likely losses from the financial crisis in the three years to 2010 have been reduced by $600 billion to $3.4 trillion as the world economy grows faster than previously expected, the International Monetary Fund said Wednesday.

The organization warned however that the impetus for far-reaching financial reforms risked being lost if the improving situation leads to complacency.

In its half-yearly Global Financial Stability Report presented in Istanbul, Turkey, the fund said concerted efforts by governments and central banks to deal with the crisis and fledgling signs of a global economic recovery have helped limit the losses.

"Systemic risks have been substantially reduced following unprecedented policy actions and nascent signs of improvement in the real economy," the IMF report said.

"There is growing confidence that the global economy has turned the corner, underpinning the improvements in financial markets," it added.

The IMF said its analysis suggests that U.S. banks are more than halfway through the loss cycle to 2010, whereas in Europe loss recognition is less advanced, reflecting differences in the regions' economic cycles.

A top IMF official noted that the conference in Istanbul was taking place just over a year since the Lehman Brothers bankruptcy triggered the sharpest phase of the global financial and economic crisis.

"Fortunately, the situation is very different today," said Jose Vinals, IMF Financial Counsellor and Director of the Monetary and Capital Markets Department.

"We are on the road to recovery, but it doesn't mean that risks have disappeared."

"Bank balance sheets have been stabilized," Vinals said. But "there is still a substantial need for capital" to safeguard the financial system.

Over the last year, governments around the world have bailed out banks and stimulated their economies by increasing spending, while major central banks have slashed interest rates and pumped cheap money into the financial system in an attempt to get liquidity flowing again.

The growing confidence has been most evident in stock markets around the world - most of the world's major indexes are now in positive territory for 2009 as investors have grown more optimistic about the outlook for the world economy.

Stock markets usually rally between six to nine months before actually recovery emerges and most economists reckon that most of the world's leading economic regions will be growing by the end of the year at the very least.

Already, the recessions in France, Germany and Japan have officially ended, though it will take many years for the lost output to be recouped.

The IMF's reassessment of the potential losses stemming from the financial crisis comes ahead of Thursday's World Economic Outlook, when the fund will publish its latest estimates for the global economy.

In Wednesday's report, the IMF indicated the outlook would raise its baseline forecast for global growth, with advanced economies expected to register positive growth in 2010, and emerging economies projected to rebound significantly.

Most analysts expect Thursday's report to show that 2010 global growth will be revised up to 3 percent from 2.5 percent.

Despite its more optimistic assessment of the financial fallout from the crisis, the IMF warned that risks to global stability remained high and that banks still need to rebuild their capital, strengthen earnings and wean themselves off government support.

Commercial property markets in the U.S. and Europe also continue to weaken, the IMF said.

In particular, the IMF said governments and central banks have to be careful to make sure they time the withdrawal of their assistance carefully.

Otherwise they could spark a secondary crisis or endanger monetary and fiscal stability.

It also said that complacency was a worry.

"Banking system problems could go unresolved and much-needed regulatory reforms may be delayed or diluted," it said.

"Policymakers should promptly provide a plan for the future regulatory framework that mitigates the buildup of systemic risks, grounds expectations, and underpins confidence, thereby contributing to sustained economic growth," it added.

The IMF's warnings are likely to carry more clout than they used to. The fund has seen its role enhanced as a result of the financial crisis.

Last week, leaders of the Group of 20 rich and developing countries agreed to give it the fund more responsibility for monitoring the health of the global financial system and to create an early warning system about potential risks.

Aug 20, 2009

WASHINGTON: The White House plans to announce the federal deficit is about $262 billion less than officials predicted early this year, in part because the Obama administration has provided less aid than expected to Wall Street.

The deficit still will be three times bigger than last year's.

The federal deficit this year will total $1.58 trillion, a senior White House official said late Wednesday.

The official spoke on condition of anonymity to discuss the report before its release Tuesday when President Barack Obama will be on vacation in Massachusetts.

The nonpartisan Congressional Budget Office is expected to release its midsession review the same day.

It estimated in June that it expected a deficit of $1.825 trillion.

The report for the budget year that ends Sept. 30 also would predict Washington to spend $3.653 trillion this year, the official said.

Revenue, however, would reach only $2.074 trillion.

The new deficit numbers are record-shattering, but would give the administration the opportunity to say that its policies have avoided a more extreme financial crisis and eliminated the need for further bank infusions.

Still, the deficit amount is a tremendous obstacle for an administration trying to undertake massive policy overhauls in health care and the environment.

But Stan Collender, a former congressional budget staffer, said the White House's new deficit numbers cannot be blamed on Obama.

Collender, now with Qorvis Communications, a Washington consulting firm, noted that the deficit estimate when President George W. Bush left office was $1.2 trillion and that did not include a tax adjustment and additional spending for operations in Iraq and Afghanistan, approved this year, that Bush also would have sought.

The midsummer report was supposed to have been released by mid-July but was delayed, which led to speculation the White House was delaying the bad news until Congress left on its August recess.

Other administrations delayed releasing similar reports during their first year in office.

Obama's budget had included a $250 billion placeholder for a second bailout of the nation's troubled banks but did not ask Congress for it because of the fear that the administration was spending too heavily.

The administration also had anticipated failures of more banks, but the survival of most banks saved billions for Washington.

The report comes during a rough patch for Obama's presidency.

The rancor surrounding the Democrats' proposed health care overhaul also provides a distraction during a monthlong break when much of Washington is in a lull.

The administration predicted this year that unemployment would peak at about 9 percent without a big stimulus package and 8 percent with one.

The nation's debt, the total of accumulated annual budget deficits, now stands at $11.7 trillion.

In the scheme of things, that is more important than talking about the "deficit," which only looks at a one-year slice of bookkeeping and ignores previous indebtedness that is still outstanding.

Even so, the administration has projected that the annual deficit for the current budget year will hit the $1.58 trillion figure, more than three times the size of last year's deficit of $455 billion.

Economists predict that an improved economic climate could help reduce the deficit in the 2010 fiscal year to $1.3 trillion.

Obama has promised to reduce the budget to $533 billion in the 2013 fiscal year.

"The deficit is obviously very large and a problem," said economist Mark Zandi of Moody's Economy.com.

"But it's not quite as bad as what expectations were a few months ago."

Earlier this year, Zandi, whose observations are frequently cited by administration and congressional officials, had predicted that the administration would have to get congressional approval for additional rescue funds for financial institutions.

Now that the worst of the economic crisis is past and recovery is slowly under way, Congress must halt the mounting increase in U.S. debt to avoid damage to long-term growth and destruction of the dollar, Warren Buffett is urging.

The plainspoken billionaire weighed in with his view in an Op-Ed piece published in The New York Times Wednesday, saying that once recovery is solidified, lawmakers need to exercise "extraordinary political will" and slow the printing of money to finance the spike in debt.

That huge spending for financial bailout and economic stimulus was sorely needed to rescue the economy in its greatest peril since the 1930s, Buffett said, but now "unchecked emissions" of dollars "will certainly cause the purchasing power of currency to melt" the way runaway carbon emissions will likely melt icebergs.

With government spending now nearly double what it is taking in, "truly major changes in both taxes and outlays will be required," Buffett wrote.

"A revived economy can't come close to bridging that sort of gap."

Buffett, one of the world's wealthiest men, enjoys opining on issues of the day.

And as the "Oracle of Omaha" and head of a successful investment firm, his views carry weight in the public arena.

He has gained a sharper political profile in recent years and has spoken out, for example, on the obligation of the privileged to help the poor.

Buffett was a top economic adviser to Republican Arnold Schwarzenegger's first campaign for California governor and advised Democrat John Kerry's presidential campaign in 2004.

Last September at the height of the financial turmoil, Buffett's firm, Berkshire Hathway Inc., rushed in with a $5 billion in investment in Wall Street powerhouse Goldman Sachs Group Inc., a move viewed as a vote of confidence for a survivor of a crisis that felled two of its investment banking peers.

The economy "is now out of the emergency room and appears to be on a slow path to recovery," Buffett wrote in the Op-Ed.

"But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself."

Because of the deficit, the amount of U.S. debt that is publicly held likely will rise to around 56 percent of Gross Domestic Product this fiscal year ending Oct. 1, from 41 percent last year, Buffett noted.

The three ways of financing the rising debt - borrowing from other countries, borrowing from Americans or printing money - all carry problems, he said.

"The United States is spewing a potentially damaging substance into our economy - greenback emissions," Buffett wrote.

The numbers of poor and uninsured Americans are likely rising - with more than 38.8 million believed to be in poverty.

Rebecca Blank, the Commerce Department's undersecretary of economic affairs, spoke to The Associated Press in advance of next month's closely watched release of 2008 census data.

Noting the figures are not yet final, Blank said the numbers will likely show a "statistically significant" increase in the poverty rate, to at least 12.7 percent.

That would represent a jump of more than 1.5 million poor people last year.

"There's no question that 2008 economically was a much worse year than 2007," she said Wednesday.

"The question is how much and how bad."

The number of Americans without medical insurance is also expected to notably increase due largely to rising unemployment and the erosion of private coverage paid for by employers and individuals, but Blank declined to say by how much.

In 2007, the number of uninsured fell by more than 1 million mostly because government programs such as Medicaid for the poor picked up the slack.

The census figures, set to be released Sept. 10, could have important ramifications as Congress returns from its August recess to debate health reform, its cost, and the ways to pay for it.

Republicans also have traditionally pointed to the intractable poverty rate as a sign that government programs do not work, a claim likely to be repeated often in light of the federal economic stimulus package.

In a 30-minute interview, Blank said the census figures released next month could possibly understate the actual number of poor people, since the poverty rate is a lagging indicator that tends to accelerate over time.

As a result, the 2008 data could prove to be the tip of the iceberg, with more significant declines reflected in 2009 figures released next year.

Blank, a former co-director of the National Poverty Center at the University of Michigan, estimated this year that poverty could eventually hit 14.8 percent or more in the United States should unemployment reach 10 percent as some analysts have predicted.

That would be almost one of every seven Americans.

Based on 2007 figures, the poverty rate currently stands at 12.5 percent, or 37.3 million, largely unchanged from recent years.

The official poverty level is now $21,203 for a family of four, $13,540 for a family of two, based on a calculation that includes only cash income before deductions for taxes.

It excludes capital gains and it does not take into account accumulated wealth or assets, such as a home.

On Wednesday, Blank said she was working with the Census Bureau to provide better measures of poverty.

Such alternative measures, which will be released sometime after Sept. 10, will seek to better incorporate added costs of health care, child care, housing and transportation, but also noncash income from the stimulus and other government programs, such as tax credits and food stamps.

Aug 18, 2009

Job cuts announced by US employers jumped 31 per cent in July to over 97,000, increasing for the first time in six months, warning of a further hike in downsizing activity by the last quarter of the year, a report said today.

After falling to a 15-month low in June planned job cuts announced by US employers jumped to 97,373 in July. It was the first increase in monthly job cuts since January, global outplacement consultancy Challenger, Gray & Christmas Inc said here in its latest report.

"After June's surprisingly low job-cut total, a July rebound was not entirely unexpected. While there are signs that the economy is stabilising and the pace of layoffs slowing, we are still a long way from a full recovery. In fact, monthly job cuts are likely to return to levels in excess of 100,000 by the fourth quarter," Challenger, Gray & Christmas CEO John Challenger said.

Job cuts had fallen 33 per cent in June to 74,393, the lowest monthly total since March 2008. The July total was 6 per cent lower than the same month a year ago, when employers announced 1,03,312 cuts. So far this year, employers have announced 9,94,048 job cuts, 72 per cent more than 5,79,260 layoffs through the first seven months of 2008.

The July surge in job cuts was led by firms in the transportation industry, which announced plans to reduce payrolls by 27,954 positions, a five-fold increase from the June layoff total of 5,587.

The telecommunications sector also experienced an increase in layoffs last month with job cuts surging to 17,601 in July from 802 in June.

Meanwhile, the automotive sector, which leads all other industries in year-to-date job cuts with 1,22,212 layoffs has seen layoff announcements decline in each of the last three months. These companies announced 2,716 job cuts in July.

"Declining layoffs in the automotive industry may not be indicative of a turnaround. Instead, these employers simply may not have any room for additional job cuts if they hope to build new fleets of more eco-friendly cars," Challenger added.

With consumer and business spending at a standstill transportation companies have little choice but to make further cutbacks in staffing, it said, adding, that a surge in hiring could take place around the holidays.

Other sectors which saw downsizing during July are government/non-profit (7,131), industrial goods (6,548) and financial (5,030). While economic conditions and cost-cutting claimed over 58,000 jobs, voluntary severance led to 15,070 job cuts in July.

Employers also announced plans to hire a total of 17,183 employees with retail (14,200) and aerospace/defence (1,160) leading the pack.

Lockheed Martin, the world's largest defense contractor, said it plans to cut about 800 jobs at its space systems division by the end of the year, as it anticipates flat budgets for space programs at NASA and the Pentagon in the coming decade.

"We looked at the budget forecasts and new program starts looking at three to five years in the future and realized we need to be appropriately sized," said Charles Manor, a Lockheed spokesman. "We need to get a bit smaller" he said, because the company expects few new programs starting with the Defense Department and NASA.

"It is a very unfortunate step, but it is necessary," he said. "It is clear that DOD's space modernization effort has reached its apex. Things will be relatively flat for the foreseeable future."

Manor said the Bethesda-based company would offer a voluntary buyout plan this month to its space systems employees. The cuts will include technical, managerial and administrative positions at facilities in Denver and Sunnyvale, Calif. The reductions represent about 4.5 percent of Lockheed's roughly 140,000-person workforce.

"NASA and DOD's budgets for space are not going to grow by leaps and bounds," said Marco A. Caceres, a senior analyst and director of space studies at the Teal Group, a Fairfax industry consultant. "There's a dose of reality that's going to set in because of the economic situation."

The job cuts announced Monday come as Lockheed is also downsizing its operation in Louisiana where it makes rocket fuel tanks for the space shuttle. The shuttle is scheduled to make its last flight in 2010. Lockheed has had other job reductions in Owego, N.Y., where it makes the new presidential helicopters. A multibillion-dollar contract on the helicopters was recently canceled.

Samsung Austin Semiconductor plans to cut 550 jobs from its Northeast Austin manufacturing operations starting on or about Oct. 18, according to a notice submitted by the company to the Texas Workforce Commission Tuesday.

The company did not immediately provide a list of job categories affected.

Samsung has said that many of the job cuts would affect equipment operators at Fab 1, which will be shut down on or about Oct. 18. But spokesman Bill Cryer acknowledged that other job classifications, including engineers and technicians also will be affected.

Samsung informed workers of the impending shutdown of Fab 1 last Friday. The company expects to spend $500 million renovating and re-equipping the older chip factory to become a part of the newer Fab 2, which is inext door to Fab 1.

Fab 1 began producing chips in 1997. Fab 2, which is much larger and far more automated, started production in 2007.

Reader's Digest Association, the venerable staple of doctors' waiting rooms and middle-class bedside tables, yesterday announced plans for voluntary bankruptcy as it became the latest victim of the advertising recession.

Equity investors, led by Ripplewood Holdings, who announced the $2.4bn acquisition in November 2006, will lose their entire $600m investment.

The pre-packaged Chapter 11 filing, agreed with senior lenders but contingent on agreement with other lenders, marks the latest media industry deal struck at the peak of the credit-fuelled buy-out market to head towards the bankruptcy courts.

Reader's Digest, launched by a husband and wife in New York in 1921 from one room under a Greenwich Village speakeasy, began as a mail-order collection of condensed articles from other magazines and evolved into a direct-mail pioneer and one of the world's largest publishers.

Nine of its 94 magazines have a circulation of more than 1m in the US alone, and its titles claim a combined global readership of 130m people in 78 countries.

But the group has been hit hard by changing reading habits and an advertising recession.

Advertising revenue from the flagship magazine fell 18.4 per cent last year, and is down another 7.2 per cent in the first six months of this year, according to the Publishers Information Bureau .

"The deal was done at the height of the frothy investment banking model, and the company was saddled with $2.2bn worth of debt," said Tom Williams, chief financial officer. Group revenues are down just 2 per cent this year, said Mary Berner, chief executive.

However, as cash flows came in below the Ripplewood-led buy-out group's expectations, it found itself struggling to make a $27m interest payment, due yesterday.

Ms Berner said the restructuring would not affect its operations or suppliers. "This is a balance sheet issue and not an operational issue," she said.

Jun 22, 2009

A surprisingly bleak forecast for the world economy pushed stocks to their biggest loss in two months.

Major stock indexes tumbled by more than 2 percent Monday, sending the Dow Jones industrial average down 201 points, after the World Bank estimated the global economy will shrink 2.9 percent in 2009. It previously predicted a 1.7 percent contraction.

The grim assessment was the latest unwelcome surprise for the market since last month and further eroded hopes that the economy was starting to emerge from recession.

Investors began driving stocks sharply higher in early March, encouraged by modest improvements in housing, manufacturing and even unemployment.

The dampened economic outlook from the World Bank, a global lender based in Washington, also weighed on the prices of oil, metals, and other commodities.

Those price drops in turn sent energy and metal producers' shares falling.

Hugh Johnson, chief investment officer of Johnson Illington Advisors, said the downbeat economic prediction confirmed fears that have been building in the market for two weeks.

"The forecast by the World Bank just dramatized that the market may have overstated what's coming for the economy," he said.

The stock market is coming off its first weekly loss in more than a month after mixed economic readings last week.

Investors have gone from enjoying a string of better-than-expected economic data to trying to manage a list of worries about the economy.

Stocks have lost ground several times in the last month on fears that rising interest rates and inflation would upend an economic recovery.

Many analysts also say the relief that erupted in early March about the economy then led to outsize expectations for how quickly a recovery could occur.

Other economic news has hit stocks since May.

A disappointing government report last month on retail sales suggested the economy remained fragile, and the Federal Reserve reined in its expectations for how the economy will fare this year.

There were no major economic reports Monday, but traders will get data this week on new and existing home sales, durable goods orders, gross domestic product and personal incomes and spending.

The Federal Reserve also will be in the spotlight after its two-day meeting on monetary policy ends Wednesday.

The central bank is widely expected to hold its key funds rate steady near zero, but investors want to know whether policymakers will say the economy is recovering or still in need of aid.

The Dow fell 200.72, or 2.4 percent, to 8,339.01, its lowest finish since May 27.

It was the biggest drop for the blue chips since losing 290 points, or 3.6 percent, on April 20 as investors worried about the soundness of bank balance sheets.

The Dow has fallen for five of the last six days and remains down for June.

The Standard & Poor's 500 index fell 28.19, or 3.1 percent, to 893.04, also leaving the index with its biggest slide since April 20 and erasing its advance for the year.

The Nasdaq composite index fell 61.28, or 3.4 percent, to 1,766.19.

After Monday's drop and a 3 percent slide last week, the Dow is down 5 percent for the year.

The Nasdaq, however, remains up by 12 percent in 2009.

The market is selling off on the uncertainty of what lies ahead, said David Kotok, chairman and chief investment officer of Cumberland Advisors.

"The picture's not clear. You've got a market that's acting just that way," Kotok said.

Bond prices jumped Monday, pushing yields down, as the drop in stocks drove demand for the safety of government debt.

The yield on the benchmark 10-year Treasury note sank to 3.69 percent from 3.78 percent late Friday.

The Fed has been buying Treasurys and other kinds of debt with the hope of keeping borrowing rates low at the same time the government has been issuing record amounts of debt.

The Treasury Department is planning to auction another $104 billion in debt this week.

A gauge of stock market volatility known as Wall Street's "fear index" spiked. The VIX rose more than 11 percent Monday, its biggest one-day gain since April.

Benchmark crude for August delivery fell $2.52 to settle at $67.50 a barrel on the New York Mercantile Exchange. Gold prices also slid.

Jun 10, 2009

Lloyd Banking Group provoked a furious reaction from unions and MPs tonight over its plans to shut all 164 Cheltenham & Gloucester branches and cut a further 1,660 jobs.

The decision, which came on the day the taxpayer's stake in the bailed out bank rose temporarily to 45.74%, takes the total job cull at the UK's largest high street bank to more than 4,000 since it was created in January by Lloyds TSB's rescue of HBOS. Further job cuts, as many as 25,000, are expected from the combined 140,000 workforce during the three-year integration.

The entire C&G network is to close by November after more than 150 years and more than 15 years after the Gloucester-based building society was taken over by Lloyds TSB.

The sudden move prompted speculation that Lloyds was trying to head off a move by the EU, which the bank had already warned could demand drastic sell-offs of parts of its operations to counter concerns about anti-competitiveness.

The Unite union attacked the decision as "nothing short of disgraceful". Its general secretary, Derek Simpson, warned that closing the C&G network would "rip the heart out of hundreds of local communities up and down the country". Unite also said today 500 staff at RBS have been told that they are at risk of redundancy as part of an existing job cut programme.

John McFall, chairman of the Treasury select committee, told MPs Lloyds had betrayed "the dignity of the workforce". He urged Treasury secretary Kitty Ussher to "join me in writing to Cheltenham & Gloucester to ensure that people are treated properly when it comes to being unemployed".

McFall was particularly furious the job cuts had been leaked, leaving the bank scrambling this morning to inform staff of the plan drawn up by Helen Weir, who is responsible for retail banking.

About 1,000 employees will lose their jobs as a result of the C&G closures, while the bank is cutting 265 positions across its personal loans division, which will lead to job losses in Chester and Cardiff, with other jobs also going across its retail, personal finance and mortgage sales operations.

Intelligent Finance, a brand launched to much fanfare by HBOS at the height of the dotcom boom, is to be closed to new mortgage business.

Lloyds said compulsory redundancies would be "a last resort". Weir said: "We will work through these changes carefully and sensitively and continue to consult closely with our unions throughout."

She stressed C&G would continue to be used as a mortgage brand through brokers, alongside Birmingham Midshires, Halifax and Scottish Widows. For the first time, Bank of Scotland will start to sell its own-brand mortgages in its branches, rather than those of the Halifax, the country's biggest mortgage lender.

The enlarged bank is operating a multi-brand strategy, although it is dropping the Clerical Medical name, which was part of HBOS. This is unlike the Spanish bank Santander, which recently announced plans to unite Abbey, Alliance & Leicester and Bradford & Bingley under its red flame logo.

The taxpayer stake in Lloyds yesterday rose to more 45% after the Treasury pumped in a further £1.7bn to enable the bank to exchange preference shares for ordinary shares, although the stake will slide back to 43% once the "rump" shares from the placing are sold. In the process some £2.3bn was repaid to the taxpayer.

Simpsonsaid: "UK taxpayers have not poured billions of pounds into this organisation just to see it sack thousands of hard-working people. This is truly a dark day for the financial services sector in this country."

Alex Potter, banking analyst at City broker Collins Stewart, said the closures could be a "sop" to the regulators, even though Gordon Brown allowed UK competition rules to be broken when HBOS was rescued.

The EU has yet to pronounce on the deal. "There are still antitrust concerns about the Lloyds-HBOS merger at commission level," Potter told BBC Radio 4's Today programme.

The UK aerospace sector is set to cut 10% of jobs, about 10,000 posts, in the next year, an industry body has said.

The Society of British Aerospace Companies said falling passenger levels were hitting aircraft orders as well as spending on research and development.

Demand for military planes was up by about 3% on the same time a year ago, it said, but this was partly thanks to orders placed several years ago.

The sector is worth about £20bn a year and employs about 100,000 people.

But the society's general director, Ian Godden, told the BBC this headcount was likely to be reduced by 10% in 2009.

There are fewer orders for planes and so fewer people are required to make them," said the society's chief executive, Ian Godden.

The report was released on the day that BAA - which operate seven UK airports -reported passenger numbers had fallen by 7.3% in May from a year ago after the recession hit North Atlantic traffic and airlines cut capacity at Stansted.

Unclear future

The Society of British Aerospace Companies said that sales volumes had been flat in 2008, but there had been a slight rise in turnover.

Falls were experienced in employment, orders and R&D spending, but exports, productivity and skills levels rose, it said.

"The civil sector appears to be hit harder than the defence sector but the export market and order backlogs offer some cause for optimism," Mr Godden said.

"There has been a slowdown in the sector but compared to the rest of the economy, aerospace has held up well thus far.

"Our industry is in for a difficult period in the immediate future but the degree of that difficulty is yet to become clear."

Large employers in the sector include Airbus, BAE and Rolls-Royce.

Mr Godden told the BBC that Rolls-Royce was an "exceptional case" because it not only made aircraft engines, but also carried out repairs on its engines and so was relatively well-protected during tougher times.

BRITISH Airways boss Willie Walsh has refused to rule out compulsory redundancies among the airline's 40,000 staff after setting a three-week deadline for an agreement on pay cuts and job reductions.

BA is offering voluntary redundancy to its 14,000-strong cabin crew in an effort to cut 2000 jobs.

Speaking at the annual meeting of the International Air Transport Association in Kuala Lumpur, the BA chief executive said he had set a June 30 target for reaching an agreement on pay deals because the industry was in a "fight for survival". Talks with the various unions will begin today.

Asked if BA was considering compulsory redundancies, Mr Walsh said: "I would not rule that out. We will take whatever steps are necessary to see the business through this crisis. We are working together and, I would say, generally constructively so far. But we have significant challenges that must be addressed."

Mr Walsh was confident there would be a good response to the voluntary redundancy program. "We know there is huge pent-up demand among the cabin crew group," he said.

But negotiations with cabin crew have been fraught in recent years.

A dispute with flight attendants cost the airline £80 million two years ago when they called off a threatened strike at the last minute. BA was able to run a full service but was left with multimillion-pound losses and empty terminals at Heathrow Airport after passengers avoided the airline or sought compensation for their bookings.

Mr Walsh denied that BA passengers faced a summer of strike action that could further damage a business that lost £401 million ($A816 million) last year and would disrupt the holiday plans of hundreds of thousands of passengers.

Asked if holidaymakers faced strike-led disruption, Mr Walsh said: "I don't see it. We have got very intelligent people working for us at BA. They can see what is happening in the industry. Everyone in the business can see that this is not a temporary blip and it's a massive challenge facing all airlines."

Mr Walsh said the airline would struggle to survive if it did not tackle costs, as the industry gathered in Malaysia to debate how to reduce a forecast combined loss of £5.7 billion ($A11.6 billion) this year.

German retailer Arcandor AG filed for bankruptcy protection Tuesday in an effort to salvage its department stores and its mail-order arm, a day after the government rejected its bid for state-backed emergency credit.

Arcandor said in a statement it filed with the district court in Essen, where it is based.

"Through filing for protection, our aim is to continue restructuring the company and its subsidiaries in an effort to ensure their survival," the company said.

Arcandor units including the Karstadt Warenhaus GmbH department stores and the Quelle GmbH mail-order company were involved in the filing.

Units not involved include travel operator Thomas Cook Plc, in which Arcandor holds a majority stake, and its home-shopping channel HSE 24, the statement said.

The government on Monday rejected a bid from Arcandor for euro437 million ($610 million) in state-backed credit.

"Following that, there was no sustainable financial perspective," the company said. "As of June 12, when short-term loans of euro710 million will be due, we will be insolvent."

Arcandor said that some 43,000 employees in Germany would be affected by the proceedings. They will receive their paychecks through August and then will be eligible to file for special state benefits.

"As part of the bankruptcy protection proceedings we will fight to maintain as many jobs and stores as possible," said Karl-Gerhard Eick, chairman of Arcandor's management board.

Chancellor Angela Merkel, who had repeatedly voiced skepticism about a government bailout of Arcandor, described the filing as "an unavoidable step whose opportunities should now be used."

"The pledges by the owners and creditors were absolutely not enough for us," Merkel told reporters. "We have to take care of tax money."

Merkel said Economy Minister Karl-Theodor zu Guttenberg would soon speak with Arcandor employee representatives "because the government has a great interest in being helpful."

"We have always said that an insolvency filing can offer the possibility to put the company on new feet and open up prospects for it," Merkel told reporters.

She said she saw opportunities for jobs in joining up with other companies, such as Metro AG, the owner of rival department store chain Kaufhof.

Metro spokesman Ruediger Stahlschmidt said after Tuesday's filing for bankruptcy protection that his company was still interested in taking over some 60 of the 90 Karstadt department stores and their employees.

Metro has proposed a merger that would produce one large retail company, though negotiations so far have made little headway.

"We hope ... that we will be able to return to talks next week," Stahlschmidt said.

Earlier in the day, the Economy Minister Karl-Theodor zu Guttenberg had spelled out the requirements for any government backing, including "significant contributions" from its owners and a debt moratorium from creditor banks.

The St. Regis Monarch Beach, infamous as the hotel where American International Group sponsored a luxury retreat just days after accepting a federal bailout, has been scheduled for a foreclosure auction.

The companies that own the resort are in default on a $70-million loan from Citigroup Global Markets Realty Group, people knowledgeable about the debt said Tuesday.

Negotiations continue in an effort to avoid an auction, according to those sources. But unless something is worked out, the St. Regis will go on the block July 7, to be sold to the highest bidder, according to a "terms of public sale" document obtained by The Times.

The resort's troubles come as the recession and credit crunch have hammered the hotel industry, depressing room rates and occupancy levels and making loans all but impossible for hotel owners to get.

Resorts like the St. Regis, which cater to wealthy travelers and the high-end corporate retreat business, have seen some of the steepest declines in revenue.

Business is so bad -- and funding so expensive -- that hardly any hotels are being sold these days, and most are now worth 50% to 80% less than at the peak, said hotel broker Alan X. Reay of Atlas Hospitality Group in Costa Mesa.

Just this week, Sunstone Hotel Investors Inc. said it would turn the trendy W Hotel in downtown San Diego over to its lenders, part of a growing trend that Reay said was a "bloodbath."

The St. Regis -- which has several restaurants, a golf course and a private beach club -- has been hit by a steep drop in bookings, according to the people with knowledge of the situation.

Built by the Makarechian development family of Newport Beach, the property is current, for now, on two other mortgages totaling $230 million on the 400-room hotel and golf course, these people said, speaking on condition of anonymity because of the sensitivity of the situation.

When the Makarechians and their partners, including San Francisco's Farralon Capital hedge fund, refinanced the property and incurred $300 million in debt in 2007, credit markets had not yet seized up and the hotel's revenues were high enough to support the payments.

But that's no longer the case, these people said. Neither Citigroup nor representatives of the St. Regis would comment on the record.

The St. Regis always aimed to satisfy the smallest whims of wealthy people and high-end corporate travelers.

Before the hotel opened in 2001, Paul Makarechian, the 27-year-old scion overseeing non-residential projects for the family, took The Times on a tour, pointing out sweeping tapestries, elaborately stitched duvet covers matching fabric-draped headboards -- even motion sensors so employees would know without knocking if guests were present.

"If you're going to build a five-star luxury resort hotel that will outdo every other deluxe hotel on the planet, you don't scrimp on sheets," he said. "You don't scrimp on anything."

But in these times, perhaps a bit more austerity is in order.

Although the St. Regis is not directly on the waterfront, the Pacific Ocean is visible from its six restaurants and it boasts a five-star Mobil Travel Guide rating, compared with four stars for the nearby Ritz-Carlton and Montage resorts.

Guests can take a shuttle across the golf course to a private ocean-front club at Monarch Beach, the northernmost stretch of Dana Point, where they can sip cocktails after taking surfing lessons.

The St. Regis became something of an emblem of corporate excess and greed last October, as the global financial system was threatening to melt down.

The taint arrived by association with AIG, the giant New York insurer that, because of massive wrong-way bets on the mortgage markets, became the largest recipient of bailout money from the federal government.

Just weeks after receiving its first $85 billion in federal funds, AIG shelled out more than $440,000 at the St. Regis for rooms, wining and dining, spa treatments and rounds of golf to reward 100 top salespeople.

The Presidential Suite, which normally goes for $3,200, was booked for five nights, The Times reported.

The event was widely vilified and lampooned, and bookings at the St. Regis dropped by 20% in the months following it, St. Regis marketing director Michael Mustafa told Hotels Magazine.

By Mustafa's estimate, about a third of the drop-off was attributable to what the magazine termed the "AIG curse."

"My phone started ringing off the hook," Mustafa recalled. "That was the worst week of my life."

At the St. Regis, managers couldn't be reached for comment Tuesday. But it appeared the debt problem would not directly affect resort visitors. The Citigroup real estate arm is pursuing what is known as a non-judicial foreclosure, meaning no sheriff's deputies nailing notices to the hotel walls or sales on the courthouse steps.

Instead, the auction is to be held at First American Title Co. in Santa Ana.

Bidders would be vying for the hotel and golf course, but not the surrounding residential areas, including a yet-to-be-developed parcel on the hotel's south flank, which is owned separately by the Makarechian-Farralon partnership.

Citigroup itself is allowed to bid, according to the "terms of public sale" document. The Makarechians and partners also are likely to enter bids.

The package to be sold includes the obligation to pay the $230 million in senior mortgages on the property.

Airlines will lose $9bn (£5.7bn) this year, nearly double previous forecasts, as carriers fight to stay afloat in the "most difficult" trading conditions they have ever faced, the industry's leading body has warned.

Buffeted by a collapse in business traffic, falling fares and the threat of resurgent fuel costs, the industry is expected to come close to matching last year's losses of $10.4bn, said the International Air Transport Association (Iata). Revenues are expected to fall by 15% this year, a decline of $80bn, as passenger numbers fall and airlines slash fares to entice a dwindling amount of potential customers. As a result, the forecast industry loss this year has nearly doubled from $4.7bn to $9bn.

Giovanni Bisignani, Iata chief executive, said the industry's future depended on a "drastic" reshaping by governments, through lower taxation and fewer ownership guidelines, and by mergers between airlines.

"There is no modern precedent for today's economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced," said Bisignani.

The Iata boss is renowned within the industry for his apocalyptic outlooks, prompting a gentle rebuke from the chief operating officer of Airbus, John Leahy, who said the long-term outlook for aircraft manufacturers remained strong.

However, Bisignani's comments were backed by leading airline executives this morning at the Iata annual general meeting in Kuala Lumpur. Willie Walsh, British Airways chief executive, said "every" airline was in a fight for survival.

"Everyone is fighting for survival, if you look at their financial performances," said the BA boss, whose airline lost a record £401m last year. Asked if he agreed with the assessment of arch-rival and Virgin Atlantic co-owner Sir Richard Branson, who said two major carriers could go bust this year, Walsh joked that he was unlikely to reach an accord with the tycoon on anything. "If he said two I am going to disagree with him." He added: "It is quite possible that you could see a number of airlines fail, with oil prices rising and no sign of the economic environment improving. There are a lot of airlines that could fail."

Pointing to Ryanair's first full-year loss in 20 years, announced last week, Walsh said "all airlines" were encountering difficulties. Last year more than 30 airlines collapsed, including Silverjet and XL Airways in the UK, following a spike in fuel costs that saw the price of oil nearly breach $150 a barrel.

Virgin Atlantic, one of BA's biggest rivals on the transatlantic route, said summer bookings would be lower than in recent years. Steve Ridgway, Virgin Atlantic chief executive, said the carrier's premium economy cabin - a halfway house between economy and business class - was proving to be a "recession buster". However, he said bookings for the upper class cabins were being hit.

"We have maintained load factors [the proportion of seats sold per flight] in premium economy and economy. But upper class load factors are down," he said. Ridgway added that he did not expect a large number of airline bankruptcies this year following the demise of more than 30 carriers in 2008.

"I think it's a fight for survival but the airlines that were most vulnerable have gone."

Tony Tyler, chief executive of Hong Kong-based Cathay Pacific, said the industry was facing "the most difficult trading conditions any of us can remember."

The biggest blow to long-haul carriers is the slump in profitable first and business class bookings, which have fallen by around 20% since the start of the year and pitched many carriers into loss-making territory. BA, for instance, relies on business passengers for more than 50% of its revenues. "Demand for first and business class has reduced significantly," said Tyler.

Bisignani said businesses were slashing travel budgets in response to the downturn: "Our customers don't have confidence. They need to reduce debt and that means less cash to spend. Business habits are changing and corporate travel budgets have been slashed. Video conferencing is now a stronger competitor."

Alan Joyce, the chief executive of Australian carrier Qantas, took a more optimistic view, saying that business and first class bookings would stage a recovery. "These businesses go through cycles. We have seen some premium markets in the past go through decline. But it does come back." Cautioning against the gloomiest predictions for the industry, he added: "If you put 10 economists in the room you would have 10 different opinions about what is going to happen." Asked if Qantas was still considering a merger with BA, after talks were aborted last year, Joyce said the airline was not mulling a deal: "We are focused on our core business." Walsh also ruled out re-starting talks.

In his annual address to the industry, Bisignani also accused the British government of using air passenger duty to pay off MPs' expenses, in the latest indication that the scandal has acquired global fame. "It is unacceptable that money collected from our responsible industry in the name of the environment is being used by an irresponsible government to pay inflated MP expense claims or bail out banks."